Price changes of two gold-mining stocks have shown strong positive correlation. Their historical relationship is. Average percentage change in A = 0.001 +0.75 (percentage change in B) Changes in B explain 60% of the variation of the changes in A (R² = 0.6). a. Suppose you own $100,000 of A. How much of B should you sell to minimize the risk of your net position? Amount of B to sell b. What is the hedge ratio? (Round your answer to 2 decimal places.)

Price changes of two gold-mining stocks have shown strong positive correlation. Their historical relationship is. Average percentage change in A = 0.001 +0.75 (percentage change in B) Changes in B explain 60% of the variation of the changes in A (R² = 0.6). a. Suppose you own $100,000 of A. How much of B should you sell to minimize the risk of your net position? Amount of B to sell b. What is the hedge ratio? (Round your answer to 2 decimal places.)

Essentials Of Investments

11th Edition

ISBN:9781260013924

Author:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Publisher:Bodie, Zvi, Kane, Alex, MARCUS, Alan J.

Chapter1: Investments: Background And Issues

Section: Chapter Questions

Problem 1PS

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The payoff table below indicates the returns (in RM thousands) of investments in stock, bond and fixed deposit under different economic situations. Type of Investment Stock Bond Fixed Deposit Table 1 Economic Situation Good 150 50 45 Stable 60 40 45 Poor -30 36 45 The probabilities of good, stable and poor economy are 0.3, 0.5 and 0.2, respectively. What is the best investment based on the expected monetary value criterion? Draw a decision tree.
Which of the following investments will experience the largest change in its market value as a result of changes in the level of interest rates (we are talking about the absolute value of the change, up or down)? Suppose interest rates go up or down by 50 basis points (0.5%). Rank the investments from 1 to 4 where a 1 is the most affected (largest absolute change in value) while a 4 is the least affected (smallest absolute change in value). A: $1 million invested in 3-month Treasury bills. 请选择~ B: $1 million invested in STRIPS (zero coupons) maturing in three years. |请选择 C: $1 million invested in a Treasury note maturing in three years. The note pays a 5% annual coupon. |请选择︾ D: $1 million invested in a Treasury note maturing in three years. The note pays a 10.0% annual coupon. |请选择

Which of the following is correct? O A. Common stock valuation usually treats the common stock as a perpetuity. OB. The appropriate measure for risk according to the capital asset pricing model is beta. OC. The present value of a $100 perpetuity discounted at 5% is $2,000. OD. The incremental cost is the cost of making a choice defined in terms of the next best alternative that is foregone. OE. Both B and C.
You are thinking about investing in either X corp, or Y corp. Based on the following market measures, which company could be the best option based on possible return of investment? x y Price/Earnings Ratio 10.39 12.27 Earnings per Common Share 3.5 5.4 Divident Payout .464 .320
The following payoffs are observed in frictionless markets: Dividend next period Price next period Price today Asset 1 4 84 80 Asset 2 5 105 P2 A. The rate of return on asset 2 equals 5%. B. In the absence of arbitrage opportunities, p2= 100. C. In the absence of arbitrage opportunities, the rate of return on asset 1 equals 8%. D. In the absence of arbitrage opportunities, p2= 110. E. None of the above.
Interpreting beta A firm wishes to assess the impact of changes in the market return on an asset that has a beta of 0.8. a. If the market return increased by 23%, what impact would this change be expected to have on the asset's return? b. If the market return decreased by 6%, what impact would this change be expected to have on the asset's return? c. If the market return did not change, what impact, if any, would be expected on the asset's return? d. Would this asset be considered more or less risky than the market? a. If the market return increased by 23%, the impact on the asset's return is %. (Round to one decimal place. Enter a negative percentage number if the asset return decreases.)
Could you please show me the solution.
Considering the following stock return information for Goya Foods and Bloomingdales, State of Economy Return onGoya Foods Return onBloomingdales Bear .108 −.051 Normal .109 .154 Bull .079 .239 If each state of the economy is equally likely to occur, the covariance between the two stocks is: a. -0.014820 b. 0.705700 c. -0.013900 d. 0.000190 e. -0.001195 NOTE: Indicate a negative answer with a minus sign.
None

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